Noah Education Holdings Ltd (NED)

F4Q11 Earnings Call

August 31, 2011, 08:00 a.m. ET


Jerry He - CEO

Dora Li - CFO


Ella Ji - Oppenheimer

Kun Tao - ROTH Capital Partners



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Good morning and good evening ladies and gentlemen. Welcome to Noah Education Holdings Limited Fourth Quarter and Full Fiscal 2011 Financial Results Conference Call. At this time all participants are in a listen-only mode. Following managements prepared remarks there will be a Q&A session. As a reminder this conference is being recorded.

Joining the conference today are Mr. Jerry He, Chief Executive Officer; and Ms. Dora Li, Chief Financial Officer. As at a U.S. market closed yesterday afternoon, Noah issued a press release announcing its fourth quarter and full fiscal year 2011 financial result. The release is available on the company’s IR website at Along with the presentation for today’s call. This call is also being broadcast live over the internet.

Before management’s presentation I’d like to refer to the Safe Harbor statement in connection with today’s conference call. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including certain expectations and goals which are subject to numerous assumptions and risks. Forward-looking statements involve known and unknown risks and uncertainties many of which are beyond our control which may cause actual results to differ materially from any future results or achievements implied by such forward-looking statements. The company’s actual results could differ materially from those contained in the risks factor section of the company’s final prospectus or recent filings filed with the Securities and Exchange Commission unless required by law the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

I’d now like to turn the call over to Noah’s Chief Financial Officer, Ms. Dora Li. Ms. Li, you may proceed.

Dora Li

Thank you for joining us today on our fourth quarter and full fiscal 2011 earnings conference call. I hope you all have had to chance to read our earnings press release. This quarter represented a brand new chapter for Noah with the completion of the acquisition of Yuanbo Education and the divestment of ELP Business, which allowed more to firmly establish it's footprint in the education service segment. Further to the exciting given this progress we are very pleased to report that Noah was able to deliver another set of strong results as our education service business continued to flourish with revenue growing 186% year-over-year in the first quarter and 134% year-over-year in fiscal 2011, both exceeding our guidance.

The [lowest] result was delivered by our two education service arm, Little New Star and Wentai Education, which continued to demonstrate the anticipated profit for growth potential, draw margin and highly visible business mobile enabling us to conclude the fiscal year with a strong growth momentum.

Turning to the detailed financial results for the fourth quarter and full-year 2011 as they are available in our earnings release. I’d like to highlight a few key financial metrics with you, all numbers will be in RMB unless otherwise stated.

Net revenue for the quarter which purely came from education service business up 186.4% year-over-year to 29.6 million exceeding our guidance. The strong growth was mainly driven by the contribution of Wentai Education which we acquired in August 2010 and also by the stable growth of Little New Star which grew revenue by [12 to 10%]. Wentai accounted for 61.6% of net revenue in the fourth quarter of 2011.

Gross profit up 189.3% year-over-year to 15.7 million and a gross profit margin improved 0.6 percentage points to 53%. On a full-year basis gross profit margin maintained at 53.7% a high and a stable growth margin demonstrated its extinctive feature of education service business and we expect our gross margin to maintain at a high and at stable level going forward.

Looking into detailed operating expenses. General and administrative expenses up about 52.9% year-over-year to 15.6 million mainly due to the incremental expenses from Wentai and that the share option incurred. As a percentage of revenue G&A expenses were 52.8% compared to 98.9% with the same time in fiscal 2010. A percentage remained high as infrastructure is built to support a more stabilized operation. However, as they further expand our revenue size its organic growth of Little New Star and Wentai as well as the additional contribution from Yuanbo from the coming quarter, we expect that the percentage of G&A expense to revenue will be lower in fiscal 2012.

Net of one off expenses related to the total of ELP Business, our operation is close to break-even for fourth quarter and operating losses of less than RMB1 million. Other operating expenses in the first quarter amounted to 10.1 million which included 8.7 million legal and professional services fees in relating to the total of ELP Business. This led to an operating loss of 9.6 million in this quarter.

Net loss for the quarter was 38.7 million or a loss of RMB1.11 per basic and the diluted share compared to a net loss of 3 million or a loss of RMB0.08 per basic and diluted shares in the fourth quarter of fiscal 2010. Net of one-time expenses related to ELP disposal, net loss would have been around 4 million. The one-off items includes the recognition of accumulated exchange reserve related to the ELP Business amounting to RMB30.7 million and the 3.9 million legal and the professional fees charged in this quarter.

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